Last week we talked about some of the benefits of building a digital supply network (DSN), as well as some of the challenges that companies face when shifting from traditional supply chain operations to DSNs. This week, we’re going look at what has made the rise of DSNs possible over the past couple of decades, then we’ll look at a real-world scenario that illustrates the concrete benefits of a DSN.
I’m not going to go into an exhaustive discussion of the history of IT; it’s not my bailiwick, and you don’t want to hear it. What I will say, however, is that there are three converging trends that have given rise to DSNs, and digitization in general: a reduction in computing costs, an increase in bandwidth and speed, and an explosion in data—both in volume and variety.
As big data overtook traditional data structures, companies realized that if they could find a way to harness all that data, they could enhance their knowledge and collaboration capabilities to not just enhance their traditional supply chains, but to create entirely new, digitized, interconnected supply networks.
Early adopters created proto-DSNs as far back as 2001. Now true DSNs are is becoming widespread, with fully 90% of manufacturers either implementing or considering a DSN. The results have been phenomenal for those companies who’ve made the leap to digitization. Companies that create DSNs are faster, smarter, and more flexible than ever—and both they and their end customers reap the benefits.
As an example, let’s take the case of a consumer products manufacturer that was facing serious, existential challenges with quality and costs. This manufacturer was under increased regulatory scrutiny because they’d had to issue several safety recalls over a five-year span. Their products tended to either not function correctly or, in some cases, to spontaneously ignite. Not a good look.
Because of lack of supply chain integration, they were forced into a reactive mode to solve problems. It took them too long to identify issues and to fix the problems, and they couldn’t track how effective their fixes were in the long term. Their warranty expenses were astronomical, and their reputation was sinking fast.
Their solution was to create a DSN. They built a technical infrastructure that enabled them to use cutting-edge technologies like embedded sensors on parts to capture real-time performance data. They also integrated data from all their suppliers to form a complete picture of their parts’ chain of custody. This data was coupled with textual quality and safety event data and stored in a data lake to facilitate quick retrieval and integration.
Next, they used advanced analytics tools such as probability analysis and clustering to explore their data. They used a simplified GUI and dashboards to enable users to see the data they needed, when they needed it—to quickly deliver actionable insights.
The result? To be sure, they were able to catch production problems more quickly, but the real bonus was that they were able to integrate their supply network and leverage big data and advanced analytics to improve quality and prevent those problems in the first place. They had insight into every facet of their production process to ensure that every step in that process was tracked, monitored, and tweaked to deliver peak performance.
Everyone, from suppliers, to logistics partners, to each production facility, had access to the same data set and could identify issues before they became explosive problems. The company’s warranty expense decreased over time as quality increased, the government regulators eased off, and their reputation was salvaged—creating an environment where they could increase top line revenue and long-term growth.
Will your DSN implementation turn out this well? There’s no guarantee, but I will promise you that your competition is thinking about digitizing. And if they do, and you don’t, they’ll have the ability to gain those insights that you won’t. Where will that leave you?